Southern Life and Health Ins. Co. v. Smith
| Decision Date | 02 October 1987 |
| Citation | 518 So.2d 77 |
| Parties | SOUTHERN LIFE AND HEALTH INSURANCE COMPANY v. Robert C. SMITH, Jr. Robert C. SMITH, Jr. v. SOUTHERN LIFE AND HEALTH INSURANCE COMPANY. 86-71, 86-97. |
| Court | Alabama Supreme Court |
Jack Corbitt, Ozark, and Kenneth E. Little, Vice Pres. & Gen. Counsel of Southern Life & Health Ins. Co. and Ollie L. Blan, Jr. of Spain, Gillon, Tate, Grooms & Blan, Birmingham, for appellant/cross-appellee.
Kenneth W. Quattlebaum of Brogden & Quattlebaum, Ozark, for appellee/cross-appellant.
This is a fraud case. The jury awarded Robert C. Smith, Jr., $30,000 in compensatory damages, and $35,000 in punitive damages. The trial court remitted all but $86.51 of the compensatory damages award, and the remittitur was accepted by Smith. Southern Life and Health Insurance Company appeals. Smith cross-appeals from the order remitting the compensatory damages.
The case was tried around the factual disputes of whether Smith and his wife told the agents of Southern Life that Smith's wife was pregnant or suspected that she was pregnant at the time of the taking of the application for hospital, medical, and surgical expense coverage; and whether the Southern Life agents told Smith and his wife that the policy would cover expenses connected with the pregnancy even though she was pregnant at the time of the taking of the application.
Smith paid a total premium of $86.51; $52.45 on August 12, 1982, the date of the application for the policy, and $34.06 on September 9, 1982, the date of the delivery of the policy. The policy that was delivered to Smith contained the following provision regarding maternity benefits:
In October, when an agent for Southern Life came to Smith to collect the second monthly premium, Smith informed the agent that Smith's wife was pregnant. At that time, the agent told Smith that the policy would not cover the expenses in connection with the pregnancy since the pregnancy had occurred before the application and issuance of the policy. No further premiums were paid on the policy, and the policy lapsed when the grace period expired. No claim for maternity benefits was made during the two months that the policy was in effect. A child was born to Smith and his wife approximately three months after the grace period expired. Smith never asked Southern Life to return the premium he had paid. The Smiths had coverage under the hospital, medical, and surgical expense policy for September and October 1982.
Smith was 20 years old at the time the application for the policy was taken. He had obtained his GED three years before this, and was employed as a roofer. Southern Life's agents were experienced insurance agents at the time the application was taken.
Southern Life first argues that reasonable or justifiable reliance, an essential element of actionable fraud, was not proven with the requisite sufficiency to justify submitting this action to a jury. 1
In Webb v. Renfrow, 453 So.2d 724, 727 (Ala.1984), this Court set out the basic requirements of a fraud action in Alabama:
"Actionable fraud in Alabama consists of (1) a false representation, (2) concerning a material existing fact, (3) reliance by plaintiff upon that false representation, and (4) damage to plaintiff as a proximate result."
Our decisions have held that the third element of actionable fraud, reliance, must be a reasonable reliance and that where a party has reason to doubt the truth of a representation before he acts, he has no right to act thereon. MJM, Inc. v. Casualty Indemnity Exchange, 481 So.2d 1136 (Ala.1985).
Justice Beatty, writing for a division of this Court in Halbrooks v. Jackson, 495 So.2d 591, 592 (Ala.1986) wrote:
There have been many cases in which this Court has reached the conclusion that the alleged reliance of the plaintiff was not reasonable under the circumstances, or that the circumstances were such that the representation should have aroused suspicion as to its validity in the mind of a reasonable person. Under such circumstances, if a reasonably prudent person exercising ordinary care should have discovered the facts, the plaintiff was not allowed to recover, as a matter of law. First National Bank of Mobile v. Horner, 494 So.2d 419 (Ala.1986); Kilpatrick v. Citibanc of Alabama/Andalusia, 494 So.2d 39 (Ala.1986); Rich Crest Homes v. Vaughn Place, Inc., 485 So.2d 1123 (Ala.1986); Holman v. Joe Steele Realty, Inc., 485 So.2d 1142 (Ala.1986); Taylor v. Moorman Mfg. Co., 475 So.2d 1187 (Ala.1985); Torres v. State Farm Fire & Cas. Co., 438 So.2d 757 (Ala.1983). See also Cook v. Brown, 393 So.2d 1016 (Ala.Civ.App.1981).
From Smith's testimony, it is obvious that he had a concern as to whether he could obtain hospital insurance that would cover the existing pregnancy of his wife. Smith says that he mentioned to the agents on the day the application was taken his suspicion that his wife was pregnant, and specifically asked them whether her pregnancy would be covered. Smith and his wife both testified that they saw the agents the day after the application was taken and asked whether the policy would cover her existing pregnancy. At that time, Smith had paid a $52.45 premium. No policy had been issued. There was no document that he could review to answer his question. Smith had previously obtained a disability policy from one of the same Southern Life agents with whom he was dealing. Smith was receiving disability payments under that policy at the time he applied for the hospital, medical, and surgical expense policy. There is evidence that Smith asked the person who should know, his insurance man (his "policy man"), if a certain risk was covered under a policy to be issued. It was a question of fact for the jury as to whether Smith's reliance at that time on the Southern Life agent's representation was reasonable. There is a scintilla of evidence of each element of actionable fraud.
Southern Life contends that Smith had no right to rely on the representations after the policy was delivered to him. We agree. On September 9, 1982, when the policy was delivered, the Smiths were still concerned about whether the policy would cover Mrs. Smith's existing pregnancy. They asked the agents and were informed that it would. However, at that time the policy was available for Smith to examine. The first page of the policy showed that it provided "LIMITED BENEFIT HOSPITAL, MEDICAL, SURGICAL EXPENSE COVERAGE." The "MATERNITY BENEFITS" provision, which is set out in this opinion, was on the second page and clearly showed when maternity benefits would begin. There is nothing in the record to show that Smith could not have understood this language. There was nothing to keep Smith from reading the policy. He could have received a refund of all premiums if he had surrendered the policy within 10 days after the delivery of the policy. Smith's reliance on the agents' oral statement at the time the policy was delivered to him was not reasonable, as a matter of law. First National Bank of Mobile v. Horner, supra; Kilpatrick v. Citibanc of Alabama/Andalusia, supra; Rich Crest Homes v. Vaughn Place, Inc., supra; Holman v. Joe Steele Realty, Inc., supra; Taylor v. Moorman Mfg. Co., supra; Torres v. State Farm Fire & Cas. Co., supra.
However, this does not negate the fact that if Smith was damaged by the fraud there was a scintilla of evidence that actionable fraud had been committed by Southern Life on August 12 and 13.
Southern Life next contends that there was no evidence of the fourth element of actionable fraud, damage resulting from the misrepresentation. Smith allowed the policy to lapse. No hospital, medical, or surgical expense was incurred by Smith or his wife while the policy was in effect; and, therefore, no claim was made by Smith or his wife under the policy, and thus no claim was denied by Southern Life. There was some evidence of damage, though that damage may have been de minimis. Smith lost the use of $52.54 from August 12, 1982, to September 9, 1982. The trial court did not err in submitting the case to the jury or in denying Southern Life's motion for J.N.O.V. on the insufficiency of the evidence ground.
Southern Life contends that the following argument by Smith's counsel was...
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